Is This Self-Dealing? 3 Quick Questions to Ask

No topic in private foundation rules generates more questions than self-dealing. These rules are designed to ensure that foundation assets are used for charitable purposes, not private benefit, by prohibiting certain transactions between the foundation and its insiders (called disqualified persons).

The rules are strict: Even minor transactions, or ones that seem to benefit the foundation, can trigger penalties. Both the disqualified person and foundation managers who approved the transaction may face consequences, even if the action was unintentional.

Common Acts of Self-Dealing

Typical self-dealing transactions include:

• Paying rent to a disqualified person—Even at below-market rates, it’s prohibited.
• Attending fundraisers—Foundation staff or trustees may attend to assess grantees, but spouses or other disqualified persons must pay the full ticket price.
• Fulfilling a personal pledge—Foundation funds cannot satisfy an insider’s legally binding personal pledge.

3 Quick Questions to Spot Self-Dealing

When considering a transaction, ask these three questions:

1. Does it involve a disqualified person?

The IRS considers these individuals and entities disqualified:

• Foundation officers, directors, trustees, or anyone with similar authority
• Substantial contributors (generally those who gave over 2% of total contributions)
• Family members of the above—spouses, ancestors, descendants, and their spouses (siblings are excluded)
• Entities controlled 35% or more by disqualified persons
• Certain government officials

If a disqualified person is involved, self-dealing may be at play.

2. Is the transaction on the prohibited list?

The IRS prohibits:

• Sale, exchange, or lease of property
• Lending money or extending credit
• Paying, compensating, or reimbursing a disqualified person
• Providing goods, services, or facilities for money
• Allowing a disqualified person to use foundation assets or income
• Paying money or giving property to a government official

3. Does an exception apply?

While the list is broad, there are narrow exceptions, including:

• Property transactions offered at no charge
• Goods, services, or facilities offered for free for a charitable purpose, or on the same terms as the public
• Loans from a disqualified person to the foundation, interest-free, for a charitable purpose
• Reasonable and necessary compensation or expense reimbursement for disqualified persons performing legitimate foundation work
• Incidental benefits, like a donor’s name on a building or scholarship fund
• Fundraiser tickets used only by those performing foundation duties (not by guests or spouses)

Self-dealing rules are complex and strictly enforced. When in doubt, consult your attorney or refer to Exponent Philanthropy’s guide, How to Avoid Self-Dealing, to protect your foundation and stay compliant.

Self-Dealing Made Simple

How to Avoid Self-Dealing
This primer is designed for board members, officers, key staff, and legal advisors who influence your foundation’s policies, finances, or administration. Learn how to sharpen your self-dealing radar to prevent violations and protect your foundation. Get your copy »

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Join the Foundations 101: Legal Basics session at our Annual Conference to learn more about identifying potential self-dealing and know when to consult a legal expert.

Come early for the 990‑PF Pre‑Conference Tax Seminar, a focused, expert-led session that offers practical guidance on navigating private foundation tax filings. 

👉 Check out the full agenda for all sessions »

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